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Competition Law and Policy
An effective competition law is an important tool for achieving and maintaining good economic performance, including enhancing efficiencies and consumer welfare. Indonesia’s first competition law, Law Number 5 of 1999 Concerning Prohibition of Monopolistic Practices and Unfair Business Competition (“Law No. 5” or “the Law”), was enacted on March 5, 1999, and took effect one year later. The Commission for the Supervision of Business Competition (“the KPPU” or “the Commission”) was established immediately after the passage of the Law, and the KPPU’s first commissioners were appointed on June 7, 2000. In the seven years since, the KPPU has investigated more than 600 complaints of alleged unfair business competition (resulting in more than 75 case decisions) and issued more than 50 policy recommendations to the government advocating the adoption of competition-based policies across various economic sectors.
These efforts represent an important example for the region, as various other countries – including Cambodia and Philippines – are still in the preliminary stages of questioning whether and how to draft and implement a competition law. Notwithstanding Indonesia’s important efforts, a genuine competition culture has been slow to take root. This may largely be due to the fact that stakeholders do not fully understand the objective of competition law and policy. Many believe its purpose is to protect individual business actors -- particularly small and medium-size businesses – even at the expense of enhanced efficiency and consumer welfare. In addition, many stakeholders believe that Law No. 5 has many ambiguities and needs clarification through additional guidelines and amendments. Stakeholders’ experiences with the KPPU, Indonesia’s first independent agency with quasi-judicial authority, also present serious concerns about the level of fairness and due process in KPPU investigations and hearings and, more generally, its capacity to conduct a proper economics-based antitrust investigation.
However, stakeholders do credit the KPPU with some successes. Most notably, the KPPU has been extremely successful in attacking a large number of bid-rigging cartels – these represent about 50 percent to 60 percent of the Commission’s cases. In addition, the KPPU has experienced a more limited degree of success advocating that other government agencies adopt competition-based policies.
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